The Pew Charitable Trusts

It's official. The sagging U.S. economy has become a drag on tourism and business travel in most parts of the country. At least that's what the Federal Reserve Board says in its latest "Beige Book" report, which monitors the burps and sputters of the nation's economic engine.

Travel industry officials predict overall business and leisure travel this year will finish the summer slightly above last year's rate, one of the best in history. Still, the industry - and states hoping to reap big tax revenue from tourism and business travel dollars - had banked on a much better showing.

As a result, some seasonal businesses that depend solely on summer tourists for their income may turn belly-up by year's end.

South Carolina, for example, has seen a significant two percent drop in beach visits to the state's popular coastal area around Myrtle Beach. The slowdown has hit small "Mom and Pop" eateries and motels especially hard because they've been forced to cut prices right along with the big chain operations.

"If you're an individual hotel or restaurant owner, or one of these Mom and Pop motels, the picture can feel pretty pinched," says Marion Edmunds, communications director for the South Carolina Department of Parks, Recreation and Tourism.

The Fed report mentioned similar concerns by state tourism and business officials within the jurisdiction of its 12 regional offices.

"Layoffs and slower economic growth reportedly damped tourism in many parts of the country," the Fed said. "Many Districts noted that airline bookings, hotel occupancies, and hotel room rates fell in recent months. However, hotels principally struggled with a decline in business travel as companies worked to cut costs in light of slower earnings growth." The Fed's Minnesota district reported a slowdown in the Midwestern states, particularly at major attractions such as South Dakota's Mount Rushmore, which has experienced a 3.5 percent drop in visitor numbers.

The mid-Atlantic district in Philadelphia reported that advance bookings for rooms "have been declining since the summer vacation season began" and that "attendance at recent conventions and other business meetings has fallen below anticipated levels."

The Atlanta district noted that leisure travel in South Florida, the number one travel destination in the country, has been fairly brisk this summer and is on track to equal or possibly exceed last year's rates. But in Central Florida it's another story. State officials said resort tax collections from Disney World and other popular destinations are down from a year ago and hotel occupancy rates have fallen.

The picture was much the same out west. Major tourist destinations such as Yellowstone National Park reported sluggish visitor numbers. Tourism was also down in Las Vegas, Nev., and in California, the nation's second most popular tourist destination. San Francisco tourism officials reported nearly a 10 percent drop in hotel room occupancy rates. Farther west, Hawaii, tied with New York as the nation's third most popular destination for leisure travelers, had more than a one percent falloff in visitors.For states already struggling with falling budget revenues, any loss of tourism and business travel dollars, no matter how slight, is like a sharp punch to an already exhausted boxer. Altogether, the states spent more than $686 million on tourism promotion efforts this year, with Illinois, Hawaii and Florida leading the field with around $60 million each. The loss of even a dollar of that investment can be difficult for a state to absorb especially when dealing with strained budgets.

Low visitor numbers for many states have already translated into some job losses, small business failures and increased dependence on state aid.

"If you've been growing at seven, eight or nine percent a year and now you're growing at one or two percent, that's quite a difference. And so it does have an impact on things," says South Carolina's Edmunds.

In South Carolina tourism is the number one industry, employing about 200,000 people. Last year it accounted for $514 million in state revenue, most of it coming from accommodation and admission taxes associated with travel.

"States intrinsically understand the value of growing their travel and tourism products. For many, the travel industry is their first, second or third largest employer and a major source of new jobs," William S. Norton, president of the Travel Industry Association observed earlier this summer. It's no wonder states spend so much money competing for tourist dollars, he said

As the economy has gotten worse, some states have shifted their advertising focus to in-state residents, hoping to spur more weekend getaways to generate tourist bucks. But gas prices, which are now rising again, and concerns about job losses appear to be keeping people closer to home.